Quashed Service tax demand on movie exhibitor under the category of Business Support Service

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that the service of exhibiting movies by a cinema exhibitor to film producers/distributors does not fall under the category of Business Support Service (BSS). The tribunal found that movie exhibition is an independent activity, not a support or assistance function, and therefore, service tax cannot be levied on Inox Leisure Ltd for this activity. This decision overturns a previous demand for service tax, interest, and penalty.

In Inox Leisure Ltd. v. Commissioner of Service Tax [Service Tax Appeal No. 30489 of 2016 decided on October 20, 2021] Hon'ble Customs, Excise and Service Tax Appellate Tribunal, Hyderabad ("CESTAT") held that service of providing exhibition of movies by the exhibitor to the producers/distributors of such movies isnot a support or assistance activity but is an activity on its own accord, therefore does not fall under the category of Business Support Service ("BSS") as per Section 73(1A) of the Finance Act, 1994 ("the Finance Act").

Inox Leisure Ltd ("the Appellant") has challenged the order passed by the Commissioner ("Impugned Order") affirming the proposed service tax demand of Rs. 32,81,940/- under the BSS as per Section 73(1A) of the Finance Act together with interest and penalty.

The department is of the view that the Appellant provides infrastructure support service ("ISS") as part of BSS to the to the producers/distributors of films which falls within the definition of taxable service category of BSS defined under Section 65(104c) of the Finance Act.

The Hon'ble CESTAT observed that, the agreement between producer/distributor engaged in business of production and distribution of films and the Appellant is of such nature that both the parties work independently and does not interfere or influence any decision on the other party.

Observed that, the Appellant screens/exhibits a movie that has been provided by the distributor and such exhibition is not a support or assistance activity but is an activity on its own accord, thus does not fulfill the requirements of above-mentioned provisions of Finance Act and further held that such activity cannot fall under BSS.

Held that, in view of the decision of Supreme Court in Faqir Chand Gulati vs. Uppal Agencies Pvt. Ltd. [2008 (12) STR 401] and the decision of the Tribunal in Commissioner vs. Mormugao Port Trust [2018 (19) GSTL J 118 (SC)] no service tax can be levied on the Appellant under BSS.